Forget Pilbara Minerals and buy this ASX 200 lithium stock instead

Bell Potter thinks investors should buy this lithium miner for big returns.

| More on:
two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Pilbara Minerals Ltd (ASX: PLS) shares are a popular option for investors that are looking for exposure to lithium.

But just because the ASX 200 lithium stock is popular, doesn't necessarily mean it is the best way to invest in lithium right now.

For example, the team at Bell Potter currently has a hold rating and $3.60 price target on Pilbara Minerals' shares. This is notably lower than its current share price of $4.17.

But one ASX 200 lithium stock that the broker is bullish on and tipping to rise materially from current levels is Arcadium Lithium (ASX: LTM).

Why is it an ASX 200 lithium stock to buy?

Bell Potter was pleased with Arcadium Lithium's first quarter update this week, noting that it delivered earnings ahead of its expectations but in line with consensus estimates. It said:

LTM reported Q1 2024 revenue of US$261m (BP est $268m) and Adjusted EBITDA of US$109m (BP est. $68m); overall the result was broadly in line with consensus.

It also notes that the company is forecasting more of the same over the remainder of FY 2024. Though, this will be dependent on realised lithium prices, which were strong during the first quarter. It adds:

The company has held full year 2024 scenarios for revenue (US$1.25-1.9b) and adjusted EBITDA (US$420-1,000m) based on market pricing ranges of US$15,000-25,000/t LCE. LTM achieved a Q1 2024 realised price of $20,500/t for carbonate and hydroxide products, materially higher than published indices due to fixed pricing and floors on a large proportion of hydroxide volumes.

Big returns

In response to the update, the broker has retained its buy rating with a trimmed price target of $9.50.

With the ASX 200 lithium stock currently trading at $7.07, this implies potential upside of 34% for investors over the next 12 months.

To put that into context, a $10,000 investment would be worth almost $13,500 by this time next year if Bell Potter is on the money with its recommendation.

Explaining its bullish view on the lithium miner, the broker concludes:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. In supportive markets, LTM's growth pipeline could see the company more than double production over the next three years.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Man with rocket wings which have flames coming out of them.
Materials Shares

Bell Potter says this speculative ASX stock could rise 200%+

This stock could more than triple in value according to the broker. But it is only suitable for high risk…

Read more »

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
Share Gainers

Guess which ASX lithium share just leapt 13% on major financing news!

Investors are bidding up the ASX lithium share on the back of major financing news.

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Materials Shares

'Tip of the iceberg': Why this ASX lithium stock has exploded 200% in a week

What is getting investors excited this week? Let's find out.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Market News

Patriot Battery Metals share price rockets 11% on new lithium drilling results

The ASX lithium stock has more than recovered its share price losses from yesterday.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.
Materials Shares

How much passive income would I make from 300 BHP shares?

Is this mining giant a good source of income? Let's see what analysts are predicting.

Read more »

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Materials Shares

Could Liontown shares roar 30%+ higher?

Is this beaten-down lithium developer about to roar higher? Let's see what Bell Potter is saying.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Guess which ASX lithium stock dived 9% after parting ways with Albemarle

A promising agreement has been terminated but management remains confident.

Read more »

Man smiling at a laptop because of a rising share price.
Materials Shares

Novonix share price rockets on new Volkswagen deal

There's some big ASX news out of Novonix today.

Read more »